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Toy car maker taps logistics tech firm to automate shipmentgrowthAlan M. Field, Special Correspondent | Jul 25, 2016 11:22AM EDT

While Redcat Racing's products are for fun and games, making the company's supply chain hum efficiently is serious business.

Redcat Racing, a Phoenix­based provider of remote­controlled gas, nitro­powered and electric cars, faced major

challenges managing its expanding flow of shipments to resellers and individual online and traditional store

consumers. Its product line of toy cars ranged from six inches to three feet in length, from a few ounces to as much

as 27.5 pounds, and its products came in several colors. Its profit margins were so thin, the company had to be

sure it was sending the right products to each customer.

“Just imagine those 100 top­line SKUs lined up in the warehouse” where there is the picking area, said Dan Sloan,

Redcat’s chief operating officer. “Those seven pickers there want to work as fast as possible. We used to do paper

picking. We’d tell them to go to a location” and pick a specific item whose location was explained on paper.

“You always want to be accurate and do the best job, but in the back of your head, you get an idea where (a

specific model) is located,” he said. “You think, ‘I don’t have to look at the paper.’ And so mistakes were made. That

leads to an unhappy customer, and figuring out how to get the item back. It may even be an open­box item that you

can’t sell as new.”

In peak pre­Christmas season, Redcat may process 1,000 orders on a busy Monday, which could mean shipping

1,500 boxes on that day. Yet Redcat has only 22 employees, and only eight of those employees are in the

warehouse handing all that. “These same employees are also doing all the receiving and ‘putaway,’ cycle counting

and all that,” Sloan said.

So how could the company improve management of crucial in­house order­management and fulfillment processes

under such conditions? For distribution­intensive companies such as Redcat that often invest in applications to

support e­commerce, cloud­based ERP and mobility, but these various applications aren’t necessarily tightly

integrated with their own enterprise resource planning systems, and don’t have all of the features shippers need to

fully automate their order­management and fulfillment processes, according to Troy Graham, vice president of

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7/28/2016 Toy car maker taps logistics tech firm to automate shipment growth | JOC.com

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business development at Waterloo, Ontario­based logistics technology provider Descartes Systems Group. So

shippers often resort to manual processes to re­enter orders already captured by e­commerce applications (such

as BigCommerce, Shopify and Magento) into the ERP solutions the shippers use, such as NetSuite, QuickBooks or

Acumatica.

That often means “gaps in automation, resulting in labor­intensive clerical tasks, error­prone data entry and

compromised customer service,” Graham said.

Redcat imports most of its product

from China, but is starting to

source from Taiwan, according to

Sloan. “Unfortunately, there are no

U.S. companies that manufacture

product like ours,” he said.

Most of that product moves by

ocean — about 120 20­foot­

equivalent container units last

year. “We do bring in some spare

parts via air,” Sloan said, “but one

of our big goals is to reduce our

air shipments and move those

products via ocean as well.”

About 70 percent of Redcat’s

volume comes through the Port of

Long Beach to its warehouse in

Phoenix. The rest of it travels by

way of the Port of Charleston to a

third­party warehouse in

Cherryville, North Carolina.

Another major goal, Sloan said, is

“to balance inventory properly

between the two distribution

centers to serve our customers

better and keep costs down.”

To address the various distribution

challenges, Redcat partnered with

Descartes’ OzLINK to integrate a

series of software extensions to its

NetSuite­provided ERP system.

All OzLINK products are built on

the Oz Development Platform, “a

set of tools used to build business

solutions that run either in the

cloud or on­premise, and are a

complement to existing core

business systems; moving data

between the systems, automating

routing tasks or filling gaps in

application feature sets,”

according to Descartes.

The integration process has been

“easy to implement, and super­

efficient,” Sloan said. “Everything (at Redcat) is integrated into NetSuite, so it’s super­crucial that any third­party

software that we have is also completely integrated with NetSuite. I have my NetSuite dashboard where I can see

what’s going on with any part of the company that’s live up to the minute. I know how much cash we have, how

much money we owe people, how much money people owe us.”

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OzLink also increases overall productivity and minimizes warehouse costs, while optimizing transportation and

delivery processes, including fleet routing and scheduling, according to Graham. “A lot of the work we do involves a

core ERP order­management accounting system,” he explained. “The typical accounting software app is designed

(to run) accounting, sales, marketing. Often, warehouse operations and logistics are not as important to the ERP

company or the accounting company. Somebody in the business buys the new accounting system but does not

necessarily talk to the warehouse/logistics people and say, ‘What are the (logistics) implications of implementing

this new accounting software?’ And later they find that we’ve implemented this great new accounting system to run

our business, but there are a bunch of logistics challenges.”

That’s where Oz, which Descartes acquired in 2015, enters the picture, filling the gaps to address warehousing and

logistics challenges. Graham separated those challenges into a few top­line categories. The first one is called

“execution of shipment.” This means “if I have a thousand orders to process today, I need to get shipping labels

and packing slips generated, and I need to do that in an automated way. I can’t spend even 60 seconds per

shipment getting that paperwork done. That’s too much time. I also need to select the appropriate carrier, print a

shipping label, put it on the box, and send it off.”

The shipper also must verify if it has sent the right product in each box. To that end, Descartes “does a lot of work

in the area of ‘scanning automation’ to make sure that the customer receives the right product,” Graham said.

Adding to the risks, “the person in my warehouse may even be a temporary employee who is, frankly, not really

that concerned about whether they send the right item. It’s not that important to them personally. So if we can use

some automation to make sure that that person gets it right, we can improve customer service and reduce costs.

“What we do is provide extensions to those core ERP systems,” making it seamless for key ERP applications to

work in tandem with those applications that are crucial for managing logistics, including order integration, order

screening, order routing, batch address validation, wireless picking, combo pack slip, cycle counting, ASN

automation and branded email,” Graham said.

For example, when a consumer places an order with Redcat, he pays through NetSuite, which tracks who he is as

a customer, and tracks the inventory in the warehouse, he explained. “And when it is time to fulfill that order in the

warehouse, Descartes also provides some help in picking the appropriate carrier,” Graham said.

He added, “When we started working with Redcat, their business was growing. they had been used to selling to

retailers, and they were building up their e­commerce business of selling directly to consumers. (But) Redcat had a

service that was used to dealing with about 20 good­size orders per day, and all of a sudden they now needed to

deal with 50 orders; and 30 of those orders were one or two items (each), including even high­value items. So we

started working with shipping and helping them get shipping decisions made quickly, and getting documents printed

quickly.”

ERP systems are increasingly critical for small businesses that want to use modern technology as a platform for

managing their growth, according to Nick Castellina, research director of business planning and execution at

Aberdeen Group.

“As small and medium­sized businesses grow,” he said, “it can quickly become apparent that the ways of doing

business that previously brought them success are no longer completely adequate. When an organization adds

new products, locations and processes, grows its customer base and gets exposed to greater regulation and more

competition, operations naturally become more complex.”

That observation applies to their logistics and transportation operations, as much as to other activities. That’s why

“the majority of small and medium­sized businesses have moved beyond spreadsheets and accounting software to

implement ERP solutions to help them manage operations,” including those related to transportation and logistics,

Castellina said.

Fulfilling every order the right way, the first time around, is particularly crucial for companies such as Redcat, which

has adopted a “multichannel” strategy, selling not only to the resellers who were long its key market, but also

directly over the Internet to hobbyists.

“If you have (just) one customer service call that’s related to a mis­shipped production, that completely eliminates

the profitability for that one order,” given the thin margins that many small firms operate on, Sloan said.

“It’s even worse if you’re selling to someone like Amazon,” he added. “They will charge you back. They will penalize

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quickly willing to get all over you” with financial penalties if the wrong product winds up in the hands of

a customer who ordered it on their online store.

To help in that regard, Descartes has implemented software that enables Redcat to use a couple scanner

technologies. “That way, before items are shipped off to a customer, we can scan the boxes and make sure that —

for example, if a customer wanted an item that was red (toy car), we didn’t send them a black one,” Graham said.

However, there is a limitation to this technology, he admitted: “The fundamental assumption is that the bar code

that is on that product is identifying that product correctly.” The odds of that being the case are improved, as in the

case of Redcat, when the bar code on each box is generated in the same factory where the toy car is

manufactured, not by its distributor. That way, “they are pretty confident that it is the right box.”

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Contact Alan M. Field at alanfield0@gmail.com (mailto:alanfield0@gmail.com).

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